EXHIBIT D
NATURAL GAS SYSTEMS, INC.
CODE OF BUSINESS CONDUCT AND ETHICS
Introduction.
Natural Gas Systems, Inc. (the "Company") will conduct its business
honestly and ethically wherever we operate. We will constantly attempt to
improve the quality of our services, products and operations and will maintain a
reputation for honesty, fairness, respect, responsibility, integrity, trust and
sound business judgment. No illegal or unethical conduct on the part of our
directors, officers or employees or their affiliates is in the Company's best
interest. The Company will not compromise its principles for short-term
advantage. The honest and ethical performance of the Company is the sum of the
ethics of the men and women who work here. Therefore, we are all expected to
adhere to high standards of personal integrity.
This Code of Business Conduct and Ethics (this "Code") covers a wide
range of business practices and procedures. It does not cover every issue that
may arise, but it sets out basic principles to guide all directors, officers and
employees of the Company. All of our directors, officers and employees must
conduct themselves accordingly. This Code should also be provided to and
followed by the Company's other agents and representatives, including
consultants.
In accordance with applicable law, this Code will be filed with the
Securities and Exchange Commission (the "SEC"), posted on the Company's website
and/or otherwise made available for examination by our stockholders.
1. Compliance with Applicable Laws, Rules and Regulations.
Obeying the law, both in letter and in spirit, is the foundation on
which the Company's ethical standards are built. All directors, officers and
employees must respect and obey the laws of the United States and of the cities,
states and countries in which we operate. In particular, all directors, officers
and employees must comply with federal securities laws, rules and regulations
that govern the Company.
2. Avoidance of Conflicts of Interest.
The Company's directors, officers and employees must not permit their
personal interests to conflict with the interests of the Company. A "conflict of
interest" exists when an officer, director or employee of the Company directly
or indirectly participates in, or owns any interest in any business that (i)
Directly Competes with the Company or any of its subsidiaries ,or (ii) provides
material amounts of services or products to the Company, provided, however, that
this definition shall not prohibit officers directors or employees' ownership of
not more than five (5) percent of the voting stock of any publicly held
corporation. For purposes of this Code of Ethics, "Directly Compete" means to
engage in the same activities of the Company, or otherwise inhibit the
activities of the Company, in an oil or gas field in which the Company owns an
interest or in which the Company is actively seeking to own an interest. For
clarification, officers, directors and employees can engage in activities in the
same line of business as the Company and its subsidiaries, including working in
the same state, provided that such activities do not Directly Compete with the
Company.
A "conflict of interest" also exists when a person's private interests
interfere with the Company's interests. A conflict situation can arise when a
director, officer or employee takes actions, or has interests, that may make it
difficult to perform his or her Company work objectively and effectively.
Conflicts of interest may also arise when a director, officer or employee, or a
member of his or her family, receives improper personal benefits as a result of
his or her position with the Company. Loans to, or guarantees of the obligations
of, directors, officers and employees and their family members may create
conflicts of interest. Conflicts of interest are prohibited under this Code
except in limited cases under guidelines or exceptions specifically approved in
advance by the Board of Directors.
Conflicts of interest may not always be clear-cut, so if you have a
question, you should consult with our Chief Financial Officer, Mr. Sterling
McDonald. Mr. McDonald's telephone number and address are set forth in Section
15 below. Any director, officer or employee who becomes aware of any transaction
or relationship that is a conflict of interest or a potential conflict of
interest should bring it to the attention of Mr. McDonald.
3. Bribes, Kickbacks and Gifts.
No bribes, kickbacks or other similar remuneration or consideration may
be given to any person or organization in order to attract or influence business
activity. The United States Foreign Corrupt Practices Act prohibits giving
anything of value, directly or indirectly, to officials of foreign governments
or foreign political candidates in order to obtain or retain business.
Therefore, this Code strictly prohibits making illegal payments to government
officials of any country.
The Company's directors, officers and employees are also prohibited
from receiving or providing gifts, gratuities, fees or bonuses as an inducement
to attract or influence business activity. No entertainment should ever be
offered, given or accepted by any director, officer or employee (or any family
member of any such person) in connection with our business activities unless it:
(a) is consistent with customary business practices; (b) is not excessive in
value; (c) cannot be construed as a bribe or payoff; and (d) does not violate
any laws or regulations. Please discuss with your supervisor or our Chief
Financial Officer any entertainment that you are not certain is appropriate.
4. Confidential Information.
Our directors, officers and employees will often come into contact
with, or have possession of, confidential information about the Company or our
operating or non-operating interest owners, suppliers, customers or affiliates,
and they must take all appropriate steps to assure that the confidentiality of
such information is maintained. Confidential information includes all material
nonpublic information that might be of use to competitors or harmful to the
Company if disclosed. It also includes material nonpublic information that our
operating or non-operating interest owners, suppliers, customers or affiliates
have entrusted to us.
Confidential information, whether it belongs to the Company or any of
our operating or non-operating interest owners, suppliers, customers or
affiliates, may include, among other things, oil & gas prospect information
(including maps, technical data, interpretations, sensitive acreage positions
and proprietary oil and gas information of every kind), strategic business
plans, actual operating results, projections of future operating results,
marketing strategies, customer lists, personnel records, proposed acquisitions
and divestitures, new investments, changes in dividend policies, the proposed
issuance of additional securities, management changes or manufacturing costs,
processes and methods. Confidential information about our Company and other
companies, individuals and entities must be treated with sensitivity and
discretion and only be disclosed to persons within the Company whose positions
require use of that information or if disclosure is required by applicable laws,
rules and regulations. Confidential information may not be used on behalf of
third parties to the detriment of the Company.
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5. Insider Trading.
Trading in the Company's securities is covered by the Company's Insider
Trading Policy previously distributed to all employees, which Policy is hereby
incorporated in its entirety in this Code. If you would like to receive another
copy of the Insider Trading Policy or have any questions regarding such Policy,
please contract our Chief Financial Officer.
6. Public Disclosure of Information Required by the
Securities Laws.
The Company is a public company that is required to file various
reports and other documents with the SEC. An objective of this Code is to ensure
full, fair, accurate, timely and understandable disclosure in the reports and
other documents that we file with, or otherwise submit to, the SEC and in the
press releases and other public communications that we distribute.
The federal securities laws, rules and regulations require the Company
to maintain "disclosure controls and procedures," which are controls and other
procedures that are designed to ensure that financial information and
non-financial information that is required to be disclosed by us in the reports
that we file with or otherwise submit to the SEC (i) is recorded, processed,
summarized and reported within the time periods required by applicable federal
securities laws, rules and regulations and (ii) is accumulated and communicated
to our management, including our Chief Executive Officer and Chief Financial
Officer, in a manner allowing timely decisions by them regarding required
disclosure in the reports.
Some of our directors, officers and employees will be asked to assist
management in the preparation and review of the reports that we file with the
SEC, including recording, processing, summarizing and reporting to management
information for inclusion in these reports. If you are asked to assist in this
process, you must comply with all disclosure controls and procedures that are
communicated to you by management regarding the preparation of these reports.
You must also perform with diligence any responsibilities that are assigned to
you by management in connection with the preparation and review of these
reports, and you may be asked to sign a certification to the effect that you
have performed your assigned responsibilities.
SEC regulations impose upon our Chief Executive Officer and Chief
Financial Officer various obligations in connection with annual and quarterly
reports that we file with the SEC, including responsibility for:
o Establishing and maintaining disclosure controls and
procedures and internal control over financial reporting that,
among other things, ensure that material information relating
to the Company is made known to them on a timely basis;
o Designing the Company's internal control over financial
reporting to provide reasonable assurances that the Company's
financial statements are fairly presented in conformity with
generally accepted accounting principles;
o Evaluating the effectiveness of the Company's disclosure
controls and procedures and internal control over financial
reporting;
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o Disclosing (i) specified deficiencies and weaknesses in the
design or operation of the Company's internal control over
financial reporting, (ii) fraud that involves management or
other employees who have a significant role in the Company's
internal control over financial reporting, and (iii) specified
changes relating to the Company's internal control over
financial reporting; and
o Providing certifications in the Company's annual and quarterly
reports regarding the above items and other specified matters.
This Code requires our Chief Executive Officer and Chief Financial
Officer to carry out their designated responsibilities in connection with our
annual and quarterly reports, and this Code requires you, if asked, to assist
our executive officers in performing their responsibilities under these SEC
regulations.
7. Record-Keeping.
The Company requires honest and accurate recording and reporting of
information in order to make responsible business decisions. For example, only
the true and actual number of hours worked should be reported. Also, business
expense accounts must be documented and recorded accurately. If you are not sure
whether a certain expense is legitimate, ask your supervisor or our Chief
Executive Officer.
All of the Company's books, records, accounts and financial statements
must be maintained in reasonable detail, must accurately and appropriately
reflect the Company's transactions and must conform both to applicable legal
requirements and to the Company's internal control over financial reporting and
disclosure controls and procedures. All transactions must be recorded in a
manner that will present accurately and fairly our financial condition, results
of operations and cash flows and that will permit us to prepare financial
statements that are accurate, complete and in full compliance with applicable
laws, rules and regulations. Unrecorded or "off the books" funds or assets
should not be maintained unless expressly permitted by applicable laws, rules
and regulations.
Business records and communications often become public, and we should
avoid exaggeration, derogatory remarks, guesswork or inappropriate
characterizations of people and companies that can be misunderstood. This
applies equally to e-mail, internal memoranda and formal reports.
Records should be retained in accordance with the Company's record
retention policies, and records should be destroyed only if expressly permitted
by our record retention policies and applicable laws, rules and regulations. If
you become the subject of a subpoena, lawsuit or governmental investigation
relating to your work at the Company, please contact our Chief Financial Officer
immediately.
8. Corporate Opportunities.
Directors, officers and employees are prohibited from taking for
themselves personally opportunities that are discovered through the use of the
Company's property or confidential information or as a result of their position
with the Company, except upon the prior written consent of the Board of
Directors. No director, officer or employee may use corporate property,
information or position for improper personal benefit; no director, officer or
employee may use Company contacts to advance his or her private business or
personal interests at the expense of the Company or its customers, suppliers or
affiliates; and no director, officer or employee may Directly or indirectly
Compete with the Company as defined in Section 2. Directors, officers and
employees owe a duty to the Company to advance its legitimate interests when the
opportunity to do so arises.
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9. Competition and Fair Dealing.
We seek to outperform our competition fairly and honestly. We seek
competitive advantages through superior performance, never through unethical or
illegal business practices. Stealing proprietary information, possessing trade
secret information that was obtained without the owner's consent, or inducing
such disclosures by past or present employees of other companies is prohibited.
No director, officer or employee should take unfair advantage of anyone through
abuse of privileged information, misrepresentation of material facts or any
other intentional unfair-dealing practice.
To maintain the Company's valuable reputation, compliance with our
quality processes and safety requirements is essential. In the context of
ethics, quality requires that our products and services be designed to meet our
obligations to customers. All inspection and testing documents must be handled
in accordance with all applicable laws, rules and regulations.
10. Protection and Proper Use of Company Assets.
Directors, officers and employees should endeavor to protect the
Company's assets and ensure their efficient use. Theft, carelessness and waste
have a direct impact on the Company's profitability. Any suspected incident of
fraud or theft should be immediately reported for investigation. Company
equipment should not be used for material non-Company business, though
incidental personal use of items such as telephones and computers is permitted.
The obligation of directors, officers and employees to protect the
Company's assets includes its proprietary information. Proprietary information
includes intellectual property such as trade secrets, patents, trademarks and
copyrights, as well as business, marketing and service plans, engineering and
manufacturing ideas, designs, databases, records, salary information and any
unpublished financial data and reports. Unauthorized use or distribution of this
information would violate Company policy. It could also be illegal and result in
civil or even criminal penalties.
11. Discrimination and Harassment.
We are firmly committed to providing equal opportunity in all aspects
of employment and will not tolerate any illegal discrimination or harassment or
any kind. Examples include derogatory comments based on racial or ethnic
characteristics and unwelcome sexual advances.
12. Health and Safety.
The Company strives to provide each director, officer and employee with
a safe and healthful work environment. Each director, officer and employee has
responsibility for maintaining a safe and healthy workplace for all other
persons by following safety and health rules and practices and reporting
accidents, injuries and unsafe equipment, practices or conditions.
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Violence and threatening behavior are not permitted. Directors,
officers and employees should report to work in condition to perform their
duties, free from the influence of illegal drugs or alcohol. The use of illegal
drugs or alcohol in the workplace will not be tolerated.
13. Waivers and Amendments of the Code of Business Conduct and Ethics.
A waiver of any provision of this Code may be granted to any director,
officer or employee only by the Company's Board of Directors, and any such
waiver promptly will be publicly disclosed to the extent required by law.
This Code can be amended only by the Board of Directors, and any such
amendment promptly will be publicly disclosed as required by law.
14. Enforcement of the Code of Business Conduct and Ethics.
A violation of this Code by any director, officer or employee will be
subject to disciplinary action, including possible termination of employment.
The degree of discipline imposed by the Company may be influenced by whether the
person who violated this Code voluntarily disclosed the violation to the Company
and cooperated with the Company in any subsequent investigation. In some cases,
a violation of this Code may constitute a criminal offense that is subject to
prosecution by federal or state authorities.
15. Compliance Procedures; Reporting Misconduct or Other Ethical
Violations.
Directors, officers and employees should promptly report any unethical,
dishonest or illegal behavior, or any other violation of this Code or of other
Company policies and procedures, to Mr. McDonald, our Chief Financial Officer.
Mr. McDonald's telephone number is (713) 935-0122, and his address is c/o
Natural Gas Systems, Inc., 820 Gessner, Suite 1340, Houston, Texas 77024. If you
ever have any doubt about whether your conduct or that of another person
violates this Code or compromises the Company's reputation, please discuss the
issue with your supervisor or with our Chief Financial Officer.
The Company's policy is not to allow retaliation for a report of
unethical, dishonest or illegal behavior, or of any other violation of this Code
or of other Company policies and procedures, if the report about another
person's conduct is made in good faith by a director, officer or employee.
Directors, officers and employees are expected to cooperate in internal
investigations regarding possible unethical, dishonest or illegal behavior or
any other possible violation of this Code or of other Company policies and
procedures.
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ACKNOWLEDGMENT AND CERTIFICATION
The undersigned hereby acknowledges and certifies that the undersigned:
(a) has read and understands the Natural Gas Systems, Inc. Code of
Business Conduct and Ethics (the "Code of Ethics");
(b) understands that the Chief Financial Officer is available to
answer any questions the undersigned has regarding the Code of
Ethics; and
(c) will continue to comply with the Code of Ethics for as long as
the undersigned is subject thereto.
Signature:
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Date:
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Print Name:
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